Is investing in an established franchise best?

26/06/2018 08:00 | Start a business

Are well established franchises best?

For many wannabe entrepreneurs, the best franchises to own are those with an established, well-designed franchise system. A more mature franchise is ideal if you have a desire to become a business owner but lack experience and confidence.

But what exactly are the advantages of established franchise brands over new franchises? Here are just some of the reasons why a reputable franchise could be the right investment for you.

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Brand recognition

Customers are attracted to the quality and consistency that can almost be guaranteed with franchise brands. When you buy a franchise, you're buying into a name that customers expect of. Because of this, theyll visit your business knowing that theyll receive the same excellent customer experience theyve previously received in other locations.

This puts you in an advantaged position compared to your competitors who have chosen to start an independent business. This is because it doesnt really matter to loyal customers whether your brands products and services are better than other brands or not. Customers are willing to put their trust, and custom, your way as they're confident that they can rely on uniformity from one location to the next.

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Ready-made customer base

New franchises come with all the benefits of a more mature franchise, but one element it may be lacking is the ability to give you a queue of potential customers waiting for you to open. If you choose to invest in franchise brands such as McDonald's or Subway, you'll have to pay a significant fee, but in return, youll have a business that people know and love.

And its not just the big names that can give you the same loyal customer base. Many established franchises have built up a reputation in their industry which results in word of mouth recommendations. Youll find that customers also trust a respected brand over a smaller, independent business because the expectation is that the product or service will be superior.

On the other hand, if you decided to start an independent business rather than buy a franchise, you would be building up your reputation from scratch. This results in a substantial cost in both time and money. Raising awareness of your new business and developing trust and credibility requires a lot of effort.

Franchising reduces the need to raise awareness to this level meaning that youre able to focus on other elements of your business.

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Training and support

Well-structured and managed franchise systems provide you with benefits that are invaluable when you become a franchisee. Once youve signed on the dotted line, youll benefit from:

  • Tried and tested operating systems
  • Assistance with site selection
  • Help with store designs and fit out
  • Reduced equipment costs
  • Initial and ongoing training
  • Detailed operations manuals
  • Proven marketing and advertising campaigns
  • Support during your franchise launch and beyond.

As well as the support youll receive from the franchisor, youll also be joining a network of other franchisees who will be on hand to offer advice when needed. The best franchises to own are those that encourage franchisees to meet up and network regularly. This will give you the chance to share stories, ideas and concerns with your peer group.

National marketing campaigns

Marketing is an integral part of any business. Delivered the right way with the right message, marketing campaigns can be extremely powerful and crucial to the success of a franchise. Most franchisors expect franchisees to contribute to a centralised advertising fund which finances strong national brand level activity. This level of marketing can be difficult for new franchises and independent businesses to afford.

Read more about: Business plan dfinition

To maximise the impact of the brand level marketing, you should develop promotional collateral for your local community. When creating your local marketing plan, you first need to understand your community. If you live nearby and have a good awareness of the area, this is great, but if you are unfamiliar with the make-up of the community, then you need to do some research.

You need to consider the age, interests, and personality traits of the inhabitants of your local community to be able to build a profile of your customer base. Once you've identified your target market, you can review the best locations and methods to communicate with your customers effectively.

When youve got your plan in place, an established franchise will have ideas, artwork and templates already in place for you to use. This saves you the time and effort of creating something new and assures the franchisor that the integrity of their brand is being protected.

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Are there any disadvantages to buying an established franchise?

Franchising isn't for everyone regardless of how mature the system is, or not. To be sure that you're considering only the best franchises to own, you must perform due diligence before signing a franchise agreement. Only you can decide whether youre better suited to a new or mature franchise. Either way, there are pros and cons of both.

Here are a couple of perceived disadvantages of investing in an established franchise:

There are strict rules to adhere to

With any franchise, youll have to give up a bit of your freedom regarding how your business is operated. For more established franchises, the system that youre expected to follow may be stricter than those of less developed systems. This is because as a franchise gets bigger with hundreds, if not thousands, of outlets all over the globe, the need for consistency becomes even more paramount.

If this loss of freedom and the need for uniformity is something you'll find challenging, then it may be best not to become a franchisee. The ability to follow rules is core to the franchise model, so if this doesn't fit with your personality, then you'll never be happy - no matter how much money you make.

Franchisees may become over-reliant on the system.

Many of the big decisions are taken out of your hands when you become a franchisee, but youre still responsible for operating your business on a day-to-day basis. No matter how big the brand is, youll always be accountable for the performance of your franchise.

However, it can be easy to become complacent when you invest in an established franchise as the system is so well developed. You cant just sit back and expect the money to roll in, no matter how long the franchise has been around. Youll still need to invest time and money in local marketing activity, lead and motivate your staff, and provide exceptional service to your customers. Becoming over-dependent on the system will seriously affect your ability to become a successful and profitable franchisee.

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